Paper Vs. Real Estate

“OUCH! Honey, I got another paper cut. Can we buy an electric envelope opener? Also, please pick up some more deposit slips when you are out and some Grey Poupon.”

Sure Beats Landlording!

Remember the days of being a landlord (though a therapist would probably tell you to try to forget). Plunging toilets and chasing tenants around trying to get rent . Calls at Three in the morning over leaky taps may be an exciting challenge for some people. A tenant rebuilding a Harley Davidson on the living room carpet might be no big deal for a tough, macho, hardened landlord, but I’d rather invest safer and more profitably.

No More 3:00 a.m. Calls!

You will never have a mortgagor call you at Three in the morning. you will never have a trust deed get in a fight with the trust deed upstairs. Land contracts don’t lie to me. Mortgages don’t drive away in pickup trucks owing me money.

Lien-lording is Safer!

With a tenant, you have no collateral for what they owe you. You are effectively loaning money to someone specifically because they can’t afford it. With a mortgage, you have their property  as collateral and a strong interest in paying you.

Better Than Triple-Net!

A tenant is not an owner. Much of the time, pride of ownership is lacking and they can beat a property to pieces. You are responsible for all major and minor repairs.

An owner is responsible for all repairs and problems. The lender has a totally set payment and costs.

Price/Rent Depreciation

In a market decline, a landlord’s equity can be wiped out with a 20 percent drop in prices. The lender’s equity takes priority. The fair market rent can go down. Payments on mortgages are fixed.

Yield Appreciation

Sure, in an appreciating market, real estate values can go up, i would say its doesn’t make sense to own real estate. But…

Mortgages can appreciate too.

When properties go up in value, refinancing increases. As that happens, payers are chasing you down and paying you off at full face value on notes.

We call that appreciation. We appreciate it every time it happens. It can happen in down markets, too.

Also, when rent and values are going up, it is a good time to trigger some additional payments on the principal of the loan. We encourage payers to pay extra principal payments to pay the loan off much earlier and save thousands in interest.

When a payer on a note increases his payment, my yield may double. By the way, there are over a hundred ways to improve profits on notes. They work in up, down or any market. The leverage possibilities with notes equal or exceed any other form of investment.

No Tax Advantages?

Could a totally tax-free investment that doesn’t cost anything be considered a tax advantage?

IRAs and pension funds can invest in notes. You could be receiving 14 percent or more interest and a compounding cash flow in your IRA. You can even buy and sell notes in your IRA.

Fewer Problems

Many of the standard problems real estate investors run into, like property management, low cash flows, balloon payments and market price fluctuations, are avoided or minimized by paper investment.

Retirement or financial independence can be summarized in two words: “Cash Flow.”

Why invest time and energy in an investment that may take many years to create a safe cash flow when you could begin investing in the purchase of cash flows by buying paper?